Italian-American carmaker Fiat-Chrysler Thursday announced that it would merge with French rival Peugeot in a 43 billion-euro (48 billion U.S. dollars) deal that will create one of the world’s largest automakers.
Based on full-year 2018 production numbers, the combined company would produce around 8.72 million cars per year, putting it just ahead of United States-based General Motors as the third-largest automaker by volume. Germany’s Volkswagen and Toyota from Japan would remain first and second, respectively, according to information from research and data firm Statista.
The combined revenue of the two companies last year was just over 170 billion euros (190 billion U.S. dollars), a sum that would place the merger fourth in the world, just behind General Motors and ahead of South Korea’s Hyundai Motor Group.
The so called “merger of equals” was agreed quickly, only two days after the companies announced talks had been underway on Tuesday.
The deal also comes months after a proposed merger between Fiat-Chrysler and another French automaker, Renault, was scuttled after the French government — which is a shareholder with both Renault and Peugeot — expressed reservations. That did not take place this time around.
“I think Fiat was more cautious with this second merger plan, which is why the companies did not announce their plans until the deal was all but formalized,” Javier Noriega, chief economist with investment bankers Hildebrandt and Ferrar, told Xinhua.
As stand-alone companies, Fiat-Chrysler produces more vehicles than Peugeot — 4.84 million compared to 3.88 million — but shareholders from each company will end up owning exactly half of the combined entity. Carlos Tavares, Peugeot chief executive officer, will take the same role in the new company, while John Elkann of Fiat-Chrysler will be chairman of the new company.
The new company, that will own the Fiat, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, DS, Citroen, Opel and Vauxhall brand names, will be based in Amsterdam and will trade its shares on the stock exchanges in Milan, New York, and Paris.
According to Marco Leonardi, an economist with the Department for the Study of Labor and Welfare at the State University of Milan, the deal makes sense on several levels.
“Through Fiat-Chrysler, Peugeot’s cars will have access to the United States market, while Peugeot will give Fiat more access to China and other Asian markets,” Leonardi said in an interview, noting that around 14 percent of Peugeot’s shares are owned by Chinese corporate investors.
Leonardi also said that Fiat-Chrysler’s strength in mid-level and premium markets and, through the Dodge and Ram names in small trucks and sports vehicles, will be complemented by Peugeot’s strength in economical and luxury sectors with the company’s e-208 electric vehicle. The companies estimate that once they are fully integrated, they will save around 3.7 billion euros (4.1 billion U.S. dollars) a year in cost and other synergies without any plant closures.
“In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency,” the companies said in a joint media statement Thursday.
The boards of directors from both companies are expected to agree to a binding memorandum of understanding before the end of the year. Enditem